You’ve heard about interest rate cuts in the news, but what does that really mean? And what does that mean for you?
Australia’s main interest rate was cut to 0.25 percent last week, the lowest in history. It was part of an emergency package to prevent the financial system melting down as large parts of the economy are forced to shut down in order to stop COVID-19 from spreading.
According to the Reserve Bank governor Philip Lowe, this rate is expected to stay until progress is being made towards full employment, which could be many years. This means that some banks are now offering record low interest rates on its home loans some from as low as 2.19 percent.
But are the banks passing on the interest rate cuts in full?
Let’s look at what some of the main advertised home loan options are from the big four banks for owner-occupied loans (as of 14 April 2020):
Commonwealth Bank
- 2.29% on a 2 year fixed rate with Wealth Package and no service fees
- 3.85% standard variable rate with package** (No pricing applied)
Westpac
- 2.29% on a 2 Year Fixed Options Home Loan with a Premier Advantage Package
- 3.29% standard variable rate on a Rocket Repay Variable Home Loan** (No pricing applied)
National Australia Bank
- 2.29% on a 2 year fixed rate with NAB Choice Package
- 356% NAB Choice Package Variable** (No pricing applied)
ANZ
- 2.19% on a 2 year fixed home loan ANZ Breakfree package
- 3.49% ANZ Standard Variable Home Loan ANZ Breakfree package** (No pricing applied)
As you can see from the above the interest rate prices vary.
What should you do if your bank isn’t giving you the best interest rate?
Search around for a better deal
There are plenty of online home loan comparison tools available that will give you an idea of what is being offered.
Doing your research will put you in a better place to negotiate when the time comes. If this is confusing – or you just cannot be bothered with all the hassle – contact your Mortgage Broker – this is their area of expertise.
Call your bank and find out what their best rate is
Often the rate a bank gives to their existing customers isn’t the best rate available because they like to reserve the best deals for new customers.. and for those who ask. For this reason, it pays to simply call and ask what they can do for you.
Speak to your mortgage broker
Mortgage brokers are experts in matching homeowners with the right one.
Plus they have access to the latest information, lenders and product range that sometimes is not available to the general public via branch or online networks.
They can also guide you through the process to make this time and process as stress-free as possible
Fix your home loan
You’ll often find that banks provide different interest rates for fixed and variable, as seen above.
This could be a great option for you. Or you may wish to fix just part of your loan so you don’t miss out on any future interest rate cuts.
And any decision needs to be weighed up with what you need now and into the future.
Patrick Cranshaw, a Certified Mortgage Professional for over 21 years, founded North Brisbane Home Loans in 2002. His career began with ANZ Bank in New Zealand, where he progressed over 16 years to a Business Banking role in Virginia. After moving to Brisbane in 2000, Patrick led the QLD market for a home loan agency, helped set up the REMAX Real Estate Finance division, and practiced as a broker.
